The United Kingdom currently has a trade deficit with New Zealand. If the U.K. pound sterling appreciates relative to the New Zealand dollar, which of the following correctly explains the effect on the U.K.'s demand for goods from New Zealand?(1 point)

Question

Responses

The U.K.'s demand for New Zealand goods will decline.
The U.K.'s demand for New Zealand goods will decline.

The U.K.'s demand for New Zealand goods can't be determined.
The U.K.'s demand for New Zealand goods can't be determined.

The U.K.'s demand will remain the same.
The U.K.'s demand will remain the same.

The U.K.'s demand for New Zealand goods will rise.

Answer 1

The correct response is:

The U.K.'s demand for New Zealand goods will decline.

When the U.K. pound sterling appreciates relative to the New Zealand dollar, it means that the pound can buy more New Zealand dollars than before. As a result, goods from New Zealand become relatively more expensive for consumers in the U.K., leading to a decline in the demand for those goods.